Tag: ABS

More Negative Lending Indicators

The ABS has released their data to July 2018 for Housing Finance.  Investors continue to fee the market, and even first time buyers are getting twitchy, while refinancing transactions props up the numbers a little. All as expected, and this underscore more falls in lending flow, and home prices ahead. The rate of decline is increasing.  Loan stock grew 0.26% in the month, but that was in the owner occupied segment. Investor loan stock fell.

The trend estimate for the total value of dwelling finance commitments excluding alterations and additions fell 0.6%. Owner occupied housing commitments was flat, while investment housing commitments fell 1.7%.

As a result the proportion of loan flows for investment property purposes continues to drift lower to 32.7%, the lowest in recent years, while there was no change in owner occupied lending and refinance rose just a little to 20%.

In trend terms, the number of commitments for the purchase of new dwellings fell 1.8%, the number of commitments for the purchase of established dwellings fell 0.2%, while the number of commitments for the construction of dwellings rose 0.2%. In fact that was the only positive indicator!

In trend terms,  overall, the number of commitments for owner occupied housing finance fell 0.2% in July 2018.

In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments fell to 18.0% in July 2018 from 18.1% in June 2018.

The number of FTB loans for owner occupied borrowers rose by around 50.  There was a small rise in the number of fixed loans, and the average FTB loan fell by $4,000 perhaps indicating tighter borrowing terms.

The number of FTB investors continues to fall away in line with the broader trends in the investor sector.

All this points to a continued tightening of lending standards and a likley continued decline in loan volumes – which is also a leading indicator of more home price falls ahead.

 

Securitised Mortgage Assets Rising

The ABS released their June 2018 data today relating the securitised loans in Australia “Assets and Liabilities of Australian Securitisers“.

In the past year residential mortgages securitised rose by 8.9% to $108.8 billion. Overall securitised assets rose by 8.2%, which shows mortgage assets grew stronger than system.

This reflects what we have seen in the market with  non-bank and some bank lenders using this funding channel. The rise of non-bank securitisation is a significant element in the structure of the market.  As major lenders throttle back their lending standards, more higher risk loans are moving into the non-bank and securitised sectors. Of course a decade ago it was the securitised loans which took lenders down in the US and Europe.

The growth we are seeing here is in our view concerning, bearing in mind the more limited regulatory oversight.  Plus. on the liabilities side of the balance sheet, around 90% of the securities are held by Australian investors, a record.

This includes a range of sophisticated investors, including super funds, wealth managers, banks, and high-net worth individuals. But the point to make is that if home price falls continue, the risks in the securitised pools will grow, and this risk is fed back to the investor pools.

Another risk-laden feedback loop linked to the housing sector, and one which is not fully disclosed nor widely understood. The fact that the securitised pools are rated by the agencies does not fill me with great confidence either!

 

Economy grew 0.9 per cent in June quarter

The Australian economy grew 0.9 per cent in seasonally adjusted chain volume terms in the June quarter 2018, according to figures released by the Australian Bureau of Statistics (ABS) today.

New dwelling investment continued to prop up the numbers, along with government and domestic consumption.

But the two key, and concerning trends are a significant fall in the households savings ratio (as they dip into them to support their spending), and the slower GDP per capita growth, which shows that much of the GDP momentum is simply population related. This is based in trend data.

Plus, real national disposable income per capita fell by 0.2% over the quarter though it was up 2.1% over the year. And average remuneration per employee rose by only 1.7% in the year to June, so remains underwater after adjusting for inflation (2.1%).  Households remain under the gun.

Of course GDP is a really poor set of measures by which to assess the economy in any case….

Chief Economist for the ABS, Bruce Hockman, said: “Growth in domestic demand accounts for over half the growth in GDP, and reflected strength in household expenditure.”

Domestic demand increased 0.6 per cent for the quarter, driven by a 0.7 per cent growth in household consumption, with increased expenditure on both discretionary and non-discretionary goods and services.

General government final consumption expenditure increased 1.0 per cent in the June quarter. Public investment remained at elevated levels reflecting continued work on infrastructure projects across the nation.

Investment in new dwellings increased 3.6 percent for the quarter. with strength observed in Victoria and South Australia. This strength was reflected in the Construction industry, which grew 1.9 per cent for the quarter.

Compensation of employees (COE) grew 0.7 per cent for the quarter due to a rises in the number of wage and salary earners and wage rates. COE growth was prominent in the Health Care and Social Assistance industry.

Moderate growth in household disposable income coupled with strength in household consumption resulted in a decline in the household saving ratio to 1.0 per cent, recording its lowest rate since December 2007.

Will Retail Trade Weaken Ahead?

We look at the latest retail turnover figures from the ABS. What do they tell us about future growth?

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Economics and Markets
Will Retail Trade Weaken Ahead?
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Will Retail Trade Weaken Ahead?

The ABS released the retail trade turnover figures today for July 2018. The noisy seasonally adjusted numbers returned no growth on last month (which had exceed expectations in June). This is what will be reported, I suspect and equates to 2.7% annually.

However, as usual we look beyond the seasonally adjusted series to the trend data, which provides a better longer term indication of what is happening. In fact on an annual basis retail is sitting at 3.1% for the past 12 months, still above both wages growth and inflation, at circa 2%. So we can conclude that households are still spending, but financial pressures are crimping their style. Savings are being raided, and credit extended.  But 3.1% is reasonably healthy, given the state of things.

The data is reported firstly by major category, with Household Goods sitting at 3.8% annually, Food Retailing at 2.7%, Departmental Stores at 2.5%, and Clothing & Footwear at 1.4%.

The state annual data, on the same basis highlights significant contrasts across the country, with Victoria leading the charge at a massive 5.4%, followed by Tasmania at 4.7%, the ACT at 4.2%, NSW 3.7%, South Australia 2.8%, Queensland 1.4% and Western Australia down 0.5%.

We often see a correlation between home price growth and retail, and as a result, we suspect Victoria will slide lower now, given the fact that in the past quarter values fell in VIC.

The mix of low income, and rising costs coupled with the latest home price falls suggests that retail will be struggling ahead, as shops continue to discount heavily to turn trade over. Indeed, the retail turnover data actually tells us very little in terms of margin and profit, and the data from our own SME surveys suggests that it is really tough for many across discretionary categories, while food costs are rising.

Later we will get a read on GDP, but it looks like household consumption will not be providing a significant leg-up to the next set of indicators.

Finally, Online retail turnover contributed 5.5 per cent to total retail turnover in original terms in July 2018, a fall from 5.7 per cent in June 2018. In July 2017 online retail turnover contributed 4.3 per cent to total retail.

June Home Lending Flows Take A Dive

The ABS released their Housing Finance data to June 2018 today.

They reported that the trend estimate for the total value of dwelling finance commitments excluding alterations and additions fell 0.7%. Owner occupied housing commitments fell 0.2% and investment housing commitments fell 1.8%. In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions fell 1.6%.

The proportion of loans for investment purposes, excluding refinance, was 41.4%, down from 53% in 2015. The proportion of refinanced owner occupied loans was 19.7%, similar to the past couple of months.

Looking at the changes month on month, owner occupied purchase of new dwellings fell 0.3%, while owner occupied purchase of established dwellings rose 0.1%, or $14,2 million.  Investment construction  lending rose 1.3%, or $14 million, borrowing for investment purposes by individuals fell 1.8%, down $154 million and investment by other entities fell 5.1% of $45.7 million. Refinance of owner occupied loans fell 0.9% or $53 million.

Overall around $31 billion of loan flows were written, down 0.7% in trend terms.

In original terms, the number of first home buyer commitments as a percentage of total owner occupied housing finance commitments rose to 18.1% in June 2018 from 17.6% in May 2018.

The number of loans fell 762 compared to last month, to 9,541. Within that we still some rises in NSW and VIC compared with a year ago, thanks to the recent FTB grants.  The proportion of loans written at fixed rates fell again.

Out First Time Buyer Tracker, which includes an estimate of first time buyers going direct to the investment sector continued at a low level, compared with a year ago.

Two final slides, first the original data showing the portfolio of loans outstanding at the banks registered an overall rise of $8 billion, and a fall in the proportion of loans for investment purposes to 33.7%, the lowest level for several years.

And the mix across states of owner occupied loans shows the strongest growth in Tasmania and Queensland, and falls in loan volumes most announced in ACT and Western Australia.

So the tighter lending conditions continue to bit, with investors less likely to get a loan. Some of this relates to demand (or lack of it) but also is being driven by the tighter lending requirements.

This is clearly seen in our surveys, where the number of rejected applications have risen significantly. This is especially true for those seeking to refinance an existing loan, including interest only loans.

The net portfolio growth, of around $9 billion, or 0.5% in the month in original terms, so overall lending remains quite strong, despite the weaker flows.

Building Approvals A Little Stronger In June 2018

The number of dwellings approved in Australia rose by 0.1 per cent in June 2018 in trend terms, according to data released by the Australian Bureau of Statistics (ABS) today.  We suspect the MSM will fixate on the less reliable seasonal results, which show a significant bounce in approvals.

Among the states and territories, dwelling approvals rose in June in the Australian Capital Territory (5.8 per cent), South Australia (5.6 per cent), Northern Territory (4.8 per cent), Tasmania (2.2 per cent), Western Australia (1.7 per cent) and New South Wales (0.2 per cent) in trend terms.

Dwelling approvals fell in trend terms in Queensland (1.6 per cent) and Victoria (1.2 per cent).

In trend terms, approvals for private sector houses fell 0.6 per cent in June. Private sector house approvals fell in Western Australia (1.4 per cent), Victoria (0.9 per cent) and New South Wales (0.8 per cent), but rose in South Australia (0.4 per cent). Private house approvals were flat in Queensland.

In seasonally adjusted terms, total dwellings rose by 6.4 per cent in June, driven by a 7.2 per cent increase in private dwellings excluding houses. Private houses rose 5.0 per cent in seasonally adjusted terms.

The value of total building approved fell 0.8 per cent in June, in trend terms, and has fallen for seven months. The value of residential building rose 0.3 per cent, while non-residential building fell 2.9 per cent.

“The rise was driven by private dwellings excluding houses, which increased by 1.1 per cent in June.” said Justin Lokhorst, Director of Construction Statistics at the ABS. “This was offset by a 0.6 per cent fall in private sector houses.”

Costs Of Living Rise 2.1% Over Past Year

The latest CPI data from the ABS today for June 2018 shows that the Index (CPI) rose 0.4 per cent in the June quarter 2018, according to the latest Australian Bureau of Statistics (ABS) figures. This follows a rise of 0.4 per cent in the March quarter 2018.

The most significant price rises this quarter are automotive fuel (+6.9 per cent), medical and hospital services (+3.1 per cent), and tobacco (+2.8 per cent). These rises are partially offset by falls in domestic holiday travel and accommodation (-2.7 per cent), motor vehicles (-2.0 per cent) and vegetables (-2.9 per cent).

In annual terms,  transport rose 5.2%, and tobacco by 7.8%. The annual rate was 2.1%, having increased 1.9 per cent through the year to March quarter 2018. Most of this annual growth is due to strength in fuel, electricity and tobacco.

For the June quarter 2018, the All Groups annual percentage change of the Weighted Average of the Eight Capital Cities is +2.1 per cent. Sydney rose 2.1 per cent, Melbourne rose 2.5 per cent, Brisbane rose 1.7 per cent, Adelaide rose 2.7 per cent, Perth rose 1.1 per cent, Hobart rose 2.4 per cent, Darwin rose 1.2 per cent, and Canberra rose 2.8 per cent.

In fact, this is a weak result, the trimmed mean falls below the lower bounds of the RBA target at 1.9%. Yet in some categories households are reporting BIG rises in costs of living. Electricity, Fuel, Health Care costs are bearing down – and frankly the CPI does seem disconnected from the real life experience of many.

Costs are still outpacing income growth, for many households, so net, net they are going backwards, still.